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Mediation Tips: Bidding against Yourself—For Fun and Profit

Mediation Tips: Bidding against Yourself—For Fun and Profit

Source:
Law.com

Date:
June 2, 2014

Without a doubt, the words mediators most often hear from
counsel are “I won’t bid against myself.” This phrase is en-
graved as immutable law in the hearts and minds of virtually
all counsel who come to mediation. By this, they mean that
they will not make another negotiating move unless their op-
ponent responds to their last move. As a general negotiating
tactic, it usually makes sense. Negotiation is a conversation,
which should normally be reciprocal. Neither side gives way
without getting something in return from the other side. But
negotiating settlements in complex lawsuits is not the same
as buying a rug in a Middle Eastern souq. Counsel need to
be more flexible, more creative and more willing to break
“rules” to reach their client’s goal. And yes, in a few instanc-
es, a creative negotiator should bid against herself. Knowing
when and why to do that gives counsel another tool to garner
a win in mediation for the client.
The first instance is at the initial offer or demand. Assume
that plaintiff has made a pre-mediation demand of $1.5 mil-
lion. Defendant has refused to respond because the demand
is so far “out of the ballpark.” What to do? By moving off the
$1.5-million demand a bit—say to $1.425 million—plaintiff
will get the negotiation conversation started, engender some
good will in the defense room and demonstrate confidence
in its initial number (because it moved only a little). It will
surprise the defense (who of course would never bid against
itself) and put plaintiff in control of the early negotiation—all
at no cost since the case obviously is never going to settle in
the $1.4- to $1.5-million range. In response, the defense is
likely to make a more businesslike, higher offer than it would
have made had the mediator insisted that it respond to the
$1.5-million demand.
The second instance is when things are stuck after two or
three rounds of minuscule, unconstructive tit-for-tat moves.
Plaintiff is telling the mediator it’s time to leave and express-
ing reluctance to lower its demand. The defense should
consider making another offer—that is, bidding against it-
self—but should shake things up by throwing in some non-
monetary term. For example, even without any response
from plaintiff, the defense might increase its monetary offer
by a small amount, but also offer to structure the settlement
in a tax-advantageous way for plaintiff. Or in an employment
dispute, the defense might raise its back pay offer a bit but
add an offer to pay for outplacement services. This breaks
the cycle of useless mini-moves, increases the “pie” of op-
tions available to frame a deal from money alone and again
demonstrates confidence.
A third instance comes late in the day, when negotiations
have reached an impasse and the parties are still separated
by a “hard” but potentially bridgeable amount. For example,
plaintiff has demanded $600,000 as its “final” number, but
the defense is at $475,000 and has told the mediator it will
never pay over $500,000. At that point, the options are to
give up (BAD!), for the mediator to make a proposal that he
thinks has less than a 50% chance of succeeding (RISKY!)
or for one of the parties to do something “out of the box.”
Assume that the defense made the last move, to $475,000,
and plaintiff will not counter. The defense could tell the me-
diator that it will raise its offer to $525,000, but only if the
mediator first confirms that plaintiff will accept it. The me-
diator will then ask plaintiff whether, if he can get $525,000
payable in 5 business days, that will do it. More often than
not, with a skilled mediator who has by then earned plaintiff’s
trust, the answer will be yes. So by bidding against itself, the
defense achieved a settlement very close to its $500,000
bottom line and well below plaintiff’s goal of $600,000.
Remember that mediation at its best is a flexible, creative
process in which confidentiality gives counsel the freedom
to experiment, to break “rules” and to shake up the negotia-
tion conversation with an unexpected tactic. Bidding against
yourself—when there is a good reason for it—is such tactic
that truly skilled and confident negotiators know can work to
their advantage. So the next time someone says, “I’ll never
bid against myself,” ask, “Why not?”
Martin Quinn, Esq. is a JAMS neutral, based in San Francisco. He
specializes in resolving business and complex tort disputes and fre-
quently acts as special master in complex federal and state actions.
He can be reached at mquinn@jamsadr.com.
1.800.352.JAMS | www.jamsadr.com
This article was originally published by LAW.COM
and is reprinted with their permission.
Mediation tips:
Bidding against Yourself—for fun and profit
By Martin Quinn, Esq.

Without a doubt, the words mediators most often hear from counsel are "I won't bid against myself." This phrase is engraved as immutable law in the hearts and minds of virtually all counsel who come to mediation. By this, they mean that they will not make another negotiating move unless their opponent responds to their last move. As a general negotiating tactic, it usually makes sense. Negotiation is a conversation, which should normally be reciprocal. Neither side gives way without getting something in return from the other side. But negotiating settlements in complex lawsuits is not the same as buying a rug in a Middle Eastern souq. Counsel need to be more flexible, more creative and more willing to break "rules" to reach their client's goal. And yes, in a few instances, a creative negotiator should bid against herself. Knowing when and why to do that gives counsel another tool to garner a win in mediation for the client. The first instance is at the initial offer or demand. Assume that plaintiff has made a pre-mediation demand of $1.5 million. Defendant has refused to respond because the demand is so far "out of the ballpark." What to do? By moving off the $1.5-million demand a bit—say to $1.425 million—plaintiff will get the negotiation conversation started, engender some good will in the defense room and demonstrate confidence in its initial number (because it moved only a little). It will surprise the defense (who of course would never bid against itself) and put plaintiff in control of the early negotiation—all at no cost since the case obviously is never going to settle in the $1.4- to $1.5-million range. In response, the defense is likely to make a more businesslike, higher offer than it would have made had the mediator insisted that it respond to the $1.5-million demand. The second instance is when things are stuck after two or three rounds of minuscule, unconstructive tit-for-tat moves. Plaintiff is telling the mediator it's time to leave and expressing reluctance to lower its demand. The defense should consider making another offer—that is, bidding against itself—but should shake things up by throwing in some non-monetary term. For example, even without any response from plaintiff, the defense might increase its monetary offer by a small amount, but also offer to structure the settlement in a tax-advantageous way for plaintiff. Or in an employment dispute, the defense might raise its back pay offer a bit but add an offer to pay for outplacement services. This breaks the cycle of useless mini-moves, increases the "pie" of options available to frame a deal from money alone and again demonstrates confidence. A third instance comes late in the day, when negotiations have reached an impasse and the parties are still separated by a "hard" but potentially bridgeable amount. For example, plaintiff has demanded $600,000 as its "final" number, but the defense is at $475,000 and has told the mediator it will never pay over $500,000. At that point, the options are to give up (BAD!), for the mediator to make a proposal that he thinks has less than a 50% chance of succeeding (RISKY!) or for one of the parties to do something "out of the box." Assume that the defense made the last move, to $475,000, and plaintiff will not counter. The defense could tell the mediator that it will raise its offer to $525,000, but only if the mediator first confirms that plaintiff will accept it. The mediator will then ask plaintiff whether, if he can get $525,000 payable in 5 business days, that will do it. More often than not, with a skilled mediator who has by then earned plaintiff's trust, the answer will be yes. So by bidding against itself, the defense achieved a settlement very close to its $500,000 bottom line and well below plaintiff's goal of $600,000. Remember that mediation at its best is a flexible, creative process in which confidentiality gives counsel the freedom to experiment, to break "rules" and to shake up the negotiation conversation with an unexpected tactic. Bidding against yourself—when there is a good reason for it—is such tactic that truly skilled and confident negotiators know can work to their advantage. So the next time someone says, "I'll never bid against myself," ask, "Why not?"

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